Europe’s Politicians Not in Sync With Euro-Zone Data

Europe’s economy is showing signs of stabilization, Olli Rehn, the European commissioner for economic affairs, said Tuesday, following its fall in GDP at the end of 2011.

That may be. But the data don’t suggest a strong rebound is on the cards.

Figures from Eurostat Tuesday showed euro-zone businesses suffered their first fall in exports in the fourth quarter since the second quarter of 2009, when the bloc was still in recession.

In the same period, businesses cut investment for the third straight quarter, and at the fastest rate since mid-2009. As if to illustrate why businesses feel compelled to do this, consumers cut their spending, and governments continued to cut expenditure.

To be fair, the figures are a couple of months old, and Mr. Rehn was talking about the here and now.

But a fall in business investment is a somewhat forward-looking: if companies aren’t investing, they will produce less and hire fewer staff than otherwise.

Meanwhile, more recent survey data haven’t been that promising. The PMI survey of business activity in February returned to contraction, dashing hopes that a January rebound might have been the start of a longer recovery. The rate of joblessness in the euro zone in January rose to 10.7% of the workforce, a 15-year high.

Meanwhile, oil prices are rising, putting pressure on consumer incomes and making it less likely they will spend on discretionary purchases. Inflation ticked up in February and if it continues to rise, the European Central Bank will be in an awkward position if it needs to pump more stimulus into the economy.

Mr. Rehn, of course, was trying to talk up the economy.

You can’t blame him: a lot of the euro zone’s problems stem from poor sentiment. Investors’ fear over high sovereign debt loads; businesses’ fear over investing at a time when consumers and governments are cutting back spending; consumers’ fear that they might lose their job as businesses retrench.

It’s a negative spiral. European leaders will be hoping that recent actions they have taken, such as the second bailout for Greece and the ECB’s cheap, near-unlimited loans to banks, will break the cycle, and the positive mood will return.